FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
GOLDEN QUEEN MINING CO. LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Province of British Columbia 0-21777 84-1067416
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
11847 Gempen Street
Mojave, California 93501
(Address of principal executive offices)
Registrant's telephone number, including area code: (661) 824-1054
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, without par value
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of outstanding shares of the issuer's common stock at March 31, 2000
was 48,046,641 shares.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I: Financial Information Page
Item 1: Consolidated Financial Statements ........................... 1
Item 2: Management's Discussion and Analysis or Plan of Operations... 11
Part II: Other Information
Item 6: Exhibits and Reports on Form 8-K ............................ 14
SIGNATURES .................................................................. 15
EXHIBIT NO. 27 .............................................................. 16
i
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PART I
ITEM 1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of the Company for the periods
covered by this report are set forth at pages 2 through 9.
[The balance of this page has been intentionally left blank.]
1
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GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
(unaudited) (audited)
---------------------------------
<S> <C> <C>
Assets (Note: 2)
Current assets:
Cash and cash equivalents $ 941,550 $ 1,469,855
Receivables 4,786 6,664
Prepaid expenses and other current assets 33,361 58,759
------------ ------------
Total current assets 979,697 1,535,278
Property and equipment, net 991,885 1,013,338
Mineral properties 26,747,055 26,428,791
Other assets 1,020,858 1,017,551
------------ ------------
$ 29,739,495 $ 29,994,958
============ ============
Liabilities and Shareholders' Equity (Note: 2)
Current liabilities:
Accounts payable $ 40,926 $ 84,493
Accrued liabilities 40,983 31,886
Current maturities of long-term debt 5,576 39,986
------------ ------------
Total current liabilities 87,485 156,365
Long-term debt, less current maturities 755,822 766,449
------------ ------------
Total liabilities 843,307 922,814
------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred shares, no par, 3,000,000 shares
authorized; no shares outstanding -- --
Common shares, no par, 100,000,000 shares
authorized; 48,046,641 shares issued and
outstanding 34,155,989 34,155,989
Deficit accumulated during the development stage
(5,259,801) (5,083,845)
------------ ------------
Total shareholders' equity 28,896,188 29,072,144
------------ ------------
$ 29,739,495 $ 29,994,958
============ ============
</TABLE>
2
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
(U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Amounts From
Date of
Inception
Three Month Three Month (November 21,
Period Ended Period Ended 1985) through
March 31, March 31, March 31,
2000 1999 2000
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
General and administrative expense $ 194,404 $ 230,197 $ 5,082,672
Interest expense -- -- 323,485
Interest income (18,110) (9,299) (1,060,714)
Other (income) expense, net (338) 5,838 58,422
Abandoned mineral interests -- -- 277,251
============ ============ ============
Net loss $ (175,956) $ (226,736) $ (4,681,116)
============ ============ ============
Net loss per share $ (0.00) $ (0.01)
============ ============
Weighted average shares outstanding 48,046,641 34,796,641
============ ============
</TABLE>
3
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GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS)
<TABLE>
<CAPTION>
Deficit
From the Date of Inception Accumulated
(November 21, 1985) During the Total
through Common Development Shareholders'
March 31, 2000 Shares Amount Stage Equity
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
November 21, 1985
Issuance of common
shares for cash 1,425,001 $ 141,313 $ -- $ 141,313
Net loss for the year -- -- (15,032) (15,032)
------------------------------------------------------
Balance, May 31, 1986 1,425,001 141,313 (15,032) 126,281
Issuance of common
shares for cash 550,000 256,971 -- 256,971
Issuance of common
shares for mineral property 25,000 13,742 -- 13,742
Net loss for the year -- -- (58,907) (58,907)
------------------------------------------------------
Balance, May 31, 1987 2,000,001 412,026 (73,939) 338,087
Issuance of common
shares for cash 1,858,748 1,753,413 -- 1,753,413
Net income for the year -- -- 38,739 38,739
------------------------------------------------------
Balance, May 31, 1988 3,858,749 2,165,439 (35,200) 2,130,239
Issuance of common
shares for cash 1,328,750 1,814,133 -- 1,814,133
Issuance of common
shares for mineral property 100,000 227,819 -- 227,819
Net loss for the year -- -- (202,160) (202,160)
------------------------------------------------------
Balance, May 31, 1989 5,287,499 4,207,391 (237,360) 3,970,031
Issuance of common
shares for cash 1,769,767 2,771,815 -- 2,771,815
Issuance of common
shares for mineral property 8,875 14,855 -- 14,855
Net loss for the year -- -- (115,966) (115,966)
------------------------------------------------------
Balance, May 31, 1990 7,066,141 6,994,061 (353,326) 6,640,735
Net income for the year -- -- 28,706 28,706
------------------------------------------------------
Balance, May 31, 1991 7,066,141 6,994,061 (324,620) 6,669,441
Net loss for the year -- -- (157,931) (157,931)
------------------------------------------------------
Balance, May 31, 1992 7,066,141 6,994,061 (482,551) 6,511,510
</TABLE>
4
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GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS)
<TABLE>
<CAPTION>
Deficit
From the Date of Inception Accumulated
(November 21, 1985) During the Total
through Common Development Shareholders'
March 31, 2000 Shares Amount Stage Equity
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss for the year -- -- (285,391) (285,391)
-----------------------------------------------------
Balance, May 31, 1993 7,066,141 6,994,061 (767,942) 6,226,119
Issuance of common
shares for cash 5,834,491 1,536,260 -- 1,536,260
Share issue costs -- -- (18,160) (18,160)
Issuance of common
shares for mineral property 128,493 23,795 -- 23,795
Net loss for the year -- -- (158,193) (158,193)
-----------------------------------------------------
Balance, May 31, 1994 13,029,125 8,554,116 (944,295) 7,609,821
Issuance of common
shares for cash 648,900 182,866 -- 182,866
Net loss for the year -- -- (219,576) (219,576)
-----------------------------------------------------
Balance, May 31, 1995 13,678,025 8,736,982 (1,163,871) 7,573,111
Issuance of common
shares for cash 2,349,160 2,023,268 -- 2,023,268
Issuance of common
shares for debt 506,215 662,282 -- 662,282
Issuance of 5,500,000
special warrants -- 9,453,437 -- 9,453,437
Special warrants issue
cost -- -- (100,726) (100,726)
Net loss for the year -- -- (426,380) (426,380)
-----------------------------------------------------
Balance, May 31, 1996 16,533,400 20,875,969 (1,690,977) 19,184,992
Issuance of common
shares for cash 18,000 10,060 -- 10,060
Issuance of common
shares for special
warrants 5,500,000 -- -- --
Special warrants issue
cost -- -- (123,806) (123,806)
Net loss for the period -- -- (348,948) (348,948)
-----------------------------------------------------
Balance, December 31, 1996 22,051,400 20,886,029 (2,163,731) 18,722,298
</TABLE>
5
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS)
<TABLE>
<CAPTION>
Deficit
From the Date of Inception Accumulated
(November 21, 1985) During the Total
through Common Development Shareholders'
March 31, 2000 Shares Amount Stage Equity
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common
shares for cash 157,000 157,050 -- 157,050
Issuance of 3,500,000
special warrants -- 5,287,315 -- 5,287,315
Issuance of common
shares for special warrants 3,500,000 -- -- --
Options to non-
employee directors -- 70,200 -- 70,200
Special warrants issue cost -- -- (163,313) (163,313)
Net loss for the year -- -- (1,047,869) (1,047,869)
---------------------------------------------------------
Balance, December 31, 1997 25,708,400 26,400,594 (3,374,913) 23,025,681
Issuance of common
shares upon exercise
of warrants 1,834,300 857,283 -- 857,283
Issuance of common
shares through
conversion of debt 2,017,941 1,000,000 -- 1,000,000
Share issuance cost -- -- (6,060) (6,060)
Issuance of common
shares for cash 5,236,000 2,439,753 -- 2,439,753
Options and re-priced
options to non-
employee directors -- 107,444 -- 107,444
Net loss for the year -- -- (971,595) (971,595)
---------------------------------------------------------
Balance, December 31, 1998 34,796,641 30,805,074 (4,352,568) 26,452,506
Issuance of 13,250,000
special warrants -- 3,350,915 -- 3,350,915
Special warrants issue cost -- -- (166,620) (166,620)
Issuance of common shares for
special warrants 13,250,000 -- -- --
Net loss for the year -- -- (564,657) (564,657)
---------------------------------------------------------
Balance, December 31, 1999 48,046,641 $ 34,155,989 $ (5,083,845) $ 29,072,144
Net loss for the period
(unaudited) -- -- (175,956) (175,956)
---------------------------------------------------------
Balance, March 31, 2000
(unaudited) 48,046,641 $ 34,155,989 $ (5,259,801) $ 28,896,188
=========================================================
</TABLE>
6
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. DOLLARS)
(UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Cumulative Amounts
From Date of
Three Month Period Three Month Period Inception (November
Ended Ended 21, 1985) through
March 31, 2000 March 31, 1999 March 31, 2000
------------------ ------------------ -------------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (175,956) $ (226,736) $ (4,681,116)
Adjustments to reconcile net
loss to cash used in operating
activities:
Abandoned mineral interests -- -- 277,251
Amortization and depreciation 21,355 20,693 299,999
Loss (gain) on disposition of
property and equipment 62 -- (100)
Options to directors -- 12,469 177,644
Changes in assets and liabilities:
Receivables 1,878 7,401 (4,786)
Prepaid expenses and other
current assets 25,398 34,903 (33,361)
Accounts payable and accrued
liabilities (69,876) (55,894) 46,503
================ ================ ================
Cash used in operating activities (197,139) (207,164) (3,917,966)
================ ================ ================
Investment activities:
Deferred exploration and
development expenditures (195,738) (295,505) (21,687,867)
Deposits on mineral properties -- -- (1,020,858)
Purchase of mineral properties (122,526) (174,007) (5,206,228)
Purchase of property and
equipment (3,307) (4,677) (1,312,638)
Proceeds from sale of property
and equipment 35 -- 20,853
================ ================ ================
Cash used in investment
activities (321,536) (474,189) (29,206,738)
================ ================ ================
Financing activities:
Borrowing under long-term debt -- -- 3,766,502
Payment of long-term debt (9,630) (14,239) (1,157,415)
</TABLE>
7
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. DOLLARS)
(UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Cumulative Amounts
From Date of
Three Month Period Three Month Period Inception (November
Ended Ended 21, 1985) through
March 31, 2000 March 31, 1999 March 31, 2000
---------------- ---------------- ----------------
<S> <C> <C> <C>
Issuance of common stock for
cash -- -- 13,086,902
Share issuance costs -- (7,883) (578,685)
Net cash received from issuance
of special warrants -- 670,183 18,091,667
Issuance of common shares upon
exercise of warrants -- -- 857,283
---------------- ---------------- ----------------
Cash provided by financing
activities (9,630) 648,061 34,066,254
---------------- ---------------- ----------------
Net change in cash and cash
equivalents (528,305) (33,292) 941,550
Cash and cash equivalents,
beginning balance 1,469,855 1,197,029 --
---------------- ---------------- ----------------
Cash and cash equivalents,
ending balance $ 941,550 $ 1,163,737 $ 941,550
================ ================ ================
Supplemental disclosures of cash
flow information:
Cash paid during period for:
Interest $ 19,922 $ 15,455 $ 780,057
Income taxes $ -- $ -- $ --
Non-cash financing and
investing activities:
Exchange of notes for common
shares $ -- $ -- $ 1,662,282
Exchange of note for future
royalty payments $ -- $ -- $ 150,000
Shares for mineral property $ -- $ -- $ 280,211
Mineral property acquired
through the issuance of long-
term debt $ -- $ -- $ 1,084,833
</TABLE>
8
<PAGE>
GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes thereto included in the Company's 1999
annual report on Form 10-KSB. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
Note 2: Financial Condition and Liquidity
The Company has had no revenues from operations since inception, has a deficit
accumulated during the development stage of $5,259,801, and has been unable to
obtain the necessary financing to complete current development activities or
exit the development stage. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management believes that its
ability to control current costs and its continued efforts at obtaining equity
based financing to complete current development activities will provide
sufficient cash to fund Company activities over the next 12 months. In addition,
management believes the Company will ultimately be successful at securing debt,
equity, or joint venture financing to fund construction of the operating
facility at the Kern County, California precious metals mine site. The ability
of the Company to obtain financing and adequately manage its expenses, and thus
maintain solvency, is dependant on equity market conditions, the ability to find
a joint venture partner, the market for precious metals, and / or the
willingness of other parties to lend the Company money. While the Company has
been successful at certain of these efforts in the past, there can be no
assurance that current efforts will be successful.
Note 3: U.S. and Canadian GAAP Differences
Under Canadian generally accepted accounting principals ("GAAP") options to
purchase common stock granted to members of the Company's board of directors are
treated under the intrinsic value method. That method has resulted in no charges
to the Company's statement of loss for directors expense. Until January 1, 2000,
under United States GAAP such options were treated under the fair value method
prescribed by Financial Accounting Standards Board ("FASB") Statement No. 123
"Accounting for Stock-Based Compensation". For the three months ended March 31,
1999, the Company's net loss for U.S. GAAP purposes was $12,469 higher than for
Canadian GAAP purposes because of this difference in treatment.
On March 31, 2000 the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation, an interpretation of APB Opinion No.
25" ("the interpretation"). Among other issues, the interpretation allows stock
options issued to members of the Company's board of directors to be treated
under the intrinsic value method for U.S. GAAP purposes. The interpretation is
effective July 1, 2000.
The Company has elected to not reflect any expense for options issued to
directors during the three months ended March 31, 2000. In addition, the
interpretation provides for a one-time adjustment to the Company's U.S. GAAP
retained earnings to reverse any directors expense taken in previous periods
under the guidance of FASB Statement No. 123. The adjustment for the Company
will be $177,644 and will be reflected as income on July 1, 2000 for U.S. GAAP
purposes.
9
<PAGE>
Note 4: Share Capital
On February 4, 2000, stock options to purchase up to a total of 325,000 shares
were granted to three directors of the Company. The options are exercisable at
the price of C$0.23 per share and, subject to certain circumstances, expire on
February 4, 2005.
[The balance of this page has been intentionally left blank.]
10
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GOLDEN QUEEN MINING CO. LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FORWARD LOOKING STATEMENT
This report contains both historical and prospective statements concerning the
Company and its operations. Historical statements are based on events that have
already happened; examples include the reported financial and operating results,
descriptions of pending and completed transactions, and management and
compensation matters. Prospective statements, on the other hand, are based on
events that are reasonably expected to happen in the future; examples include
the timing of projected operations, the likely effect or resolution of known
contingencies or other foreseeable events, and projected operating results.
Prospective statements (which are known as "forward-looking statements" under
the Private Securities Litigation Reform Act of 1995) may or may not prove true
with the passage of time because of future risks and uncertainties. The risks
and uncertainties associated with prospective statements contained in this
report include, among others, the following:
The Likelihood of Continued Losses from Operations. The Company has no revenue
from mining operations and has incurred losses from inception through March 31,
2000 of approximately $4,681,000. It is anticipated that additional financing
will be required during 2000 for continued operations. This trend is expected to
continue for at least the next two years and is expected to reverse only if, as
and when gold is produced from the Soledad Mountain Project.
The Need for Significant Additional Financing. The Company anticipates that it
will need approximately $77,600,000 in additional financing to put the Soledad
Mountain Project into production; an anticipated $66,300,000 will be used for
capital expenditures with an estimated thirteen-month construction period and
$11,300,000 will be used as working capital and for start-up expenditures. The
Company expects to finance development from additional sales of common stock,
from bank or other borrowings or, alternatively, through joint development with
another mining company. However, it has no commitment for bank financing or for
the underwriting of additional stock, and it is not a party to any agreement or
arrangement providing for joint development. Whether and to what extent
financing can be obtained will depend on a number of factors, not the least of
which is the price of gold. Gold prices fluctuate widely and are affected by
numerous factors beyond the Company's control, such as inflation, the strength
of the United States dollar and foreign currencies, global and regional demand,
and the political and economic conditions of major gold producing countries
throughout the world. As of March 31, 2000, world gold prices were approximately
$278 per ounce, a reduction of approximately 1% from prices a year ago. If gold
prices do not strengthen, it may not be economical for the Company to put the
Soledad Mountain Project into production.
Risks and Contingencies Associated with the Mining Industry Generally. The
Company is subject to all of the risks inherent in the mining industry,
including environmental risks, fluctuating metals prices, industrial accidents,
labor disputes, unusual or unexpected geologic formations, cave-ins, flooding
and periodic interruptions due to inclement weather. These risks could result in
damage to, or destruction of, mineral properties and production facilities,
personal injury, environmental damage, delays, monetary losses and legal
liability. Although the Company maintains or can be expected to maintain
insurance within ranges of coverage consistent with industry practice, no
assurance can be given that such insurance will be available at economically
feasible premiums. Insurance against environmental risks (including pollution or
other hazards resulting from the disposal of waste products generated from
exploration and production activities) is not generally available to the Company
or other companies in the mining industry. Were the Company subjected to
environmental liabilities, the payment of such liabilities would reduce the
funds available to the Company. Were the Company unable to fund fully the cost
of remedying an environmental problem, it might be required to suspend
operations or enter into interim compliance measures pending completion of
remedial activities.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
RESULTS OF OPERATIONS.
Overview. During the periods indicated in the discussion which follows the
Company has been in the exploration stage of its business and therefore has
earned no revenue from its operations. Variations in the level of expenses
between periods have been as a result of the nature, timing and cost of the
activities undertaken in the various periods. Financing of the continued
exploration of the Soledad Mountain Project during such periods has been
obtained through the sale of shares of common stock of the Company in
predominantly offshore transactions and through borrowings.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999.
General and administrative expenses decreased to $194,000 for the three months
ended March 31, 2000, from $230,000 for the three-month period ended March 31,
1999. The decrease is primarily due to a reduction in staffing and other cash
conserving efforts.
No interest expense was recognized for the three-month period ended March 31,
2000, or for the three-month period ended March 31, 1999. Interest incurred on
debt relating to the Company's investment in the Soledad Mountain Project is
capitalized as part of mineral properties.
Interest income increased to $18,000 for the three-months ended March 31, 2000,
from $9,000 for the three-month period ended March 31, 1999. The increase is
primarily due to improved rates of return on investments.
As a result of the foregoing factors, the Company incurred a net loss of
$176,000 for the three-months ended March 31, 2000, versus a net loss of
$227,000 for the three-month period ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES.
General. The Company acquired the Soledad Mountain Project in 1986. Since then
it has solidified its land position, conducted several drilling and sampling
programs to delineate ore reserves, and taken steps to secure permits and
approvals needed for production activities. The Company previously reported that
it expected to begin producing gold and silver from the project during the
second half of 1998, once permitting was completed. Because of the downturn in
world gold prices during the second half of 1997, however, the Company has not
been able to obtain financing for construction. As a consequence, production
will be delayed until construction financing can be raised.
The Company has had no reported revenues from operations since inception, and is
in the exploration or development stage. During the period from inception
through March 31, 2000, the Company used $3,918,000 in operating activities,
primarily as the result of cumulative losses of $4,681,000 for the same period.
During the same period, the Company used $29,207,000 in investing activities;
these consisted of $27,915,000 in expenditures related to the Soledad Mountain
Project and fixed asset purchases of $1,313,000. These operating and investing
activities were financed by net borrowings of $2,609,000 under various long-term
debt arrangements, and from the sale of $31,450,000 of equity securities.
At March 31, 2000, the Company held $942,000 in cash and cash equivalents. As is
discussed below under the heading "Plan of Operations", significant additional
funds will be needed to put the Soledad Mountain Project into production. These
funds are expected to come from additional sales of common stock and from bank
or other borrowings. Alternatively, the Company may decide to enter into a joint
development or other similar arrangement with another mining company to develop
the project. The Company does not have a commitment for bank financing or for
the underwriting of additional shares of its common stock, and is not a party to
any agreement or arrangement providing for the joint development of the Soledad
Mountain Project. Whether and to what extent additional or alternative financing
options are pursued by the Company will depend on a number of important
12
<PAGE>
factors, including the results of further development activities at the Soledad
Mountain Project, management's assessment of the financial markets, the overall
capital requirements for development of the project, and the price of gold. Gold
prices fluctuate widely and are affected by numerous factors beyond the
Company's control, such as inflation, the strength of the United States dollar
and foreign currencies, global and regional demand, and the political and
economic conditions of major gold producing countries throughout the world. As
of March 31, 2000, world gold prices were approximately $278 per ounce, a
reduction of approximately 1% from prices a year ago, and a reduction of
approximately 8% from prices two years ago. The project may not be economical at
current world gold prices and may not be economical until prices strengthen.
PLAN OF OPERATIONS.
Proposed Activities and Estimated Costs. The Company has substantially completed
exploration of the Soledad Mountain Project and intends to develop the project
as an open pit gold and silver mine employing a cyanide heap leach recovery
system. Development plans include the construction of infrastructure and
processing facilities, mining by open pit methods and processing precious metals
ores at a rate of up to 5.76 million tonnes (6.35 million tons) per year for at
least nine years. Concurrent heap detoxification will be employed, followed by a
reclamation of the project site.
The initial capital costs of bringing the project into production are estimated
to be $78,000,000; these include costs associated with the purchase of all
necessary facilities and equipment, construction costs, start-up costs, working
capital and contingency costs over a projected thirteen-month construction
period. The Company presently cannot secure the financing needed to bring the
project into production, and will not be able to do so unless gold prices and
the conditions in the gold equity markets improve. Based on current project cost
information, the Company believes world gold prices would have to achieve
sustained levels of $325 per ounce or better before such financing could be
obtained. The Company believes it is well-positioned to obtain this financing
when market conditions improve.
The Company estimates that total average operating costs will be $6.03 per tonne
($5.47 per ton) of ore processed, based on a stripping ratio of 4.1 to 1. These
operating costs consist of mining costs of $3.74 per tonne ($3.39 per ton),
processing costs of $1.73 per tonne ($1.57 per ton) and general and
administrative costs of $0.56 per tonne ($0.51 per ton). The Company also
estimates that average annual production rates of 130,000 ounces of gold and
1,500,000 ounces of silver can be maintained for at least nine years, at an
average cash cost (consisting of operating and royalty costs) of $176 per ounce
of gold, net of silver credits.
These development plans are based on a February 1998 feasibility study that was
updated by the Company in December 1998. The early 1998 study was prepared for
the Company by M3 Engineering and Technology Corporation incorporating the
results of the Company's 1997 drilling program. The updated study also included
the results of the 1998 program. The study was commissioned by the Company to
obtain project financing, and to provide basic project engineering information.
Ore reserve estimates and mine design features incorporated into the study were
prepared by Mine Reserves Associates, in collaboration with the Company; basic
engineering information was prepared by Bateman Engineering, Inc., and
supplemented by M3 Engineering and Technology. The total cost of the feasibility
study was $1,549,618.
The Company is currently evaluating the potential for the production and sale of
aggregates from the Soledad Mountain Project. The Company believes waste rock
and leached ore have several construction-related applications, and that the
project's proximity to major north-south and east-west railroad lines enhances
the potential of such a business. Neither of the feasibility studies referred to
above nor any other revenue and cost figures contained in this report take such
business into account.
13
<PAGE>
PERMITTING.
All significant permitting requirements for the Soledad Mountain Project were
completed in late 1997. Pending the procurement of project financing, the
Company can commence construction of surface infrastructure and processing
facilities, and, following that, can begin commercial production of gold and
silver from the project.
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14
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits. A financial data schedule is filed as exhibit no. 27 to this report.
No other exhibits are filed as part of this report.
Form 8-K Reports. The Company filed no reports on Form 8-K during the first
quarter of 2000.
[The balance of this page has been intentionally left blank.]
15
<PAGE>
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Golden Queen Mining Co. Ltd.
By: /s/ EDWARD G. THOMPSON
-------------------------
Edward G. Thompson, its President
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of the Company for the three month period ended March 31,
2000 and should be read in conjunction with, and is qualified in its entirety
by, such financial statements.
</LEGEND>
<CIK> 0001025362
<NAME> GOLDEN QUEEN MINING CO. LTD.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 941,550
<SECURITIES> 0
<RECEIVABLES> 4,786
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 979,697 <F1>
<PP&E> 28,759,798 <F2>
<DEPRECIATION> 301,745
<TOTAL-ASSETS> 29,739,495
<CURRENT-LIABILITIES> 87,485
<BONDS> 0
0
0
<COMMON> 34,155,989
<OTHER-SE> (5,259,801) <F3>
<TOTAL-LIABILITY-AND-EQUITY> 29,739,495
<SALES> 0
<TOTAL-REVENUES> 18,448 <F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 194,404 <F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175,956)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
<FN>
<F1> Includes prepaid expenses and other current assets of $33,361.
<F2> Consists of properties and equipment, net of depreciation of $991,885;
mineral properties of $26,747,055; and other long-term assets of
$1,020,858.
<F3> Consists of $5,259,801 of deficit accumulated during the development stage.
<F4> Consists of interest income of $18,110, and $338 of other income.
<F5> Consists of general and administrative expenses of $194,404.
</FN>
</TABLE>
